The Scottish government have now formally responded on the Barclay Review report, and set out what recommendations they will seek to implement.
While Finance Secretary, Derek Mackay might fall short of satisfying every lobby group, he has recognised that Scotland’s rates systems needs modernised and in doing so, a fair and competitive environment created. As someone who has previously toiled to praise the Holyrood government, I think they have called this correctly and Derek Mackay should be commended for doing so.
The heading above is the tagline to the government’s response – and coupled with the lower commercial LBTT rates in Scotland, the government’s position (if enacted in the Scottish Parliament) will give us a demonstrable competitive edge to attract occupiers, developers and investors.
In the Programme for Government announcement made by Nicola Sturgeon last week, she had already committed to trying to take forward some of the Barclay recommendations. Those included more regular revaluations (these would now be three yearly, and tone date would be brought forward from two years prior to one year). Also the Fresh Start relief would be expanded from 1 April - an increase from 50% to 100% for the first year of new occupation for all types of property (including industrial) that have been empty for six months (reduced from the current 12 months).
The main announcement from Derek Mackay, which will be welcomed by the broader property industry, is the business growth accelerator. From 1 April, every new build property would not pay any rates until occupied for the first time. On top of that, the first tenant would benefit from one year without rates. (I hope he was just being brief when he omitted to mention improving/expanding existing buildings benefiting from this - the Barclay report recommended they should). This gives developers the incentive to build, and occupiers the incentive to locate and expand, and should be applauded all around.
The Scottish government have also taken on board a number of the other recommendations in the Barclay report, much of these related to administration. It should be noted that this will include the creation of a general anti-avoidance rule (GAAR) to prevent gaps having to be plugged on an ad hoc basis.
There are some of Barclay’s recommendations that will not be put forward in legalisation to the Scottish Parliament immediately. That includes the large business supplement which Barclay recommended be reduced to 1.3pence – Derek Mackay has undertaken to so during the current Parliament should it become affordable.
In addition, further consultation and consideration will take place on other Barclay recommendations (such as removal of charity relief for independent schools and university accommodation). The property industry will be pleased that further thought will go into Barclay’s proposed removal of relief for certain empty properties (it recommended ending relief for listed buildings after two years, and adding a 10% surcharge for any property that has been empty for five years). Barclay’s proposals here were at odds with the economic reality (if a listed building is vacant, the option of demolition is usually not there; and owners of a property that has been empty for five years don’t need further taxation to rub salt in the wounds).
So all in, I think the Scottish government’s response should be rated highly – hopefully the positive sentiment is echoed in the Scottish Parliament and the Scottish government’s response can be reflected in legislation soon.